So, we certainly applaud The Boardroom Project, a group of marketing and advertising organizations, academics, marketing executives and corporations working to establish industry-wide measures and definitions which would be to marketing what Generally Accepted Accounting Principles are to accounting and ISO standards are to quality management. The group has set goals that all marketers should pursue, including greater transparency and accountability in marketing decisions, more accuracy in evaluating such decisions, and use of metrics that are meaningful for company leaders, not just other marketers. Having applauded their effort, however, we also have some reservations about the group’s recent pronouncements and underlying assumptions.
Working from Guy Powell’s definition of Return on Marketing Investment (ROMI) — “revenue (or margin) generated by a marketing program divided by the cost of that program at a given risk level” — The Boardroom Project asserts that every marketing activity should be tied to financial metrics. Specifically, the group posits a cause-and-effect chain in which each marketing activity produces an “intermediate marketing outcome” that impacts a specific “cash flow driver.” Thus, the justification for any marketing activity, and measure of its success, always relates to cash flow, which The Boardroom Project heralds as “the ultimate marketing metric.”
In many cases, we agree with this model. Our Brand Evolution™ and Sales-Smart Marketing™ programs work from a similar, if less rigid, premise: to be meaningful, marketing activities must evolve from and enhance the performance of an organization’s sales process and help achieve overall business objectives. And yes, often that means tying tactics to a cash flow driver. Often — but not always — and the tie-in isn’t always easily chart-able.
Consider the ROI of a newsletter, for example. While not appropriate for everyone, a well-conceived, high-quality newsletter can be a solid investment for clients in industries where thought leadership drives sales, where the sales process requires ongoing prospect/client education, in crowded markets where frequent client contact is essential for differentiation, and so on. Can this tactic be tied to cash flow drivers? Yes — directly in terms of new sales and cross-selling, and indirectly in terms of enhancing retention rates and referrals. Can such impact be measured? Yes — but it’s more complex, and less neatly mathematical than The Boardroom Project seems willing to allow. Adopting their model, we see two immediate challenges: how do you weight the impact of a tactic when it is just one of several tools influencing a target audience? And how do you fairly measure ROI for a tactic whose value is often cumulative? If we can’t find precise metrics to overcome those challenges, must we scrap the tactic altogether? We would say no — a better approach with tactics like client newsletters is often to see them as part of an overall sales process rather than trying to measure their ROI directly.
The Boardroom Project is right to push marketers to go beyond what we refer to as “marketing for marketing’s sake”, e.g., claiming success for a direct mail campaign by measuring market coverage while ignoring whether the campaign increased the quantity or quality of leads. Still, a model that demands that “every” marketing activity be directly tied to a cash flow driver seems to us oversimplified — worse, it could lead marketers and executives to neglect the best tactics for a specific situation, or for long-term goals, in favor of less effective tactics that are easier to link to cash flow.
We’re also concerned that this model encourages an overcompartmentalized view of marketing. It implies a one-to-one correlation between each marketing activity and a cash flow driver — but such a correlation rarely exists in a pure state. Most cash flow drivers are impacted by multiple departments and processes, and a strategy (or metric) can easily go awry if it doesn’t factor in how a company’s diverse parts must work together to achieve success. We believe a strategically integrated approach to marketing is crucial to create the interdepartmental synergies that help a business reach its full potential. Conversely, overcompartmentalization can lead to “us vs. them” internal competition and a “cover-your-own-ass” culture where employees and managers are more focused on meeting (or manipulating) “their” performance measures than on the company’s overall success. That said, cash flow metrics can be an excellent way to unite a company’s forces behind common goals — but such metrics must be engineered and implemented with the understanding that neither sales nor marketing nor any other function deserve all the credit, or blame, for cash flow performance.
The Boardroom Project’s efforts are ongoing, and we don’t want to critique too vigorously based on one presentation and a few articles. Still, what we’ve seen so far also raises a more fundamental concern — namely that the group may be defining “general” marketing best practices and metrics based on the needs and situations of just a portion of the business spectrum. While having big players like Starcom MediaVest, VNU, PepsiCo, and the ARS Group bodes well in terms of resources and influence, the group’s makeup may be skewing its assumptions and prescriptions toward large, traditional, and often publicly traded corporations. Note, for example, that a case study presented by the group at the IIR 9th Annual Conference on ROMI involved FritoLay. The work was right on — for FritoLay or a company with a similar market situation. But the marketing tactics and metrics that best serve an established, multinational, consumer products corporation are not always what will best serve a dynamic, entrepreneurial B2B, or a purpose-driven architectural firm, or a professional services business transforming regional success into a nationwide presence.
The Boardroom Project states that “marketing standards must be linked to the objectives of the firm” and to “the common language of the firm.” We agree — but for many firms, such objectives and language go beyond the group’s limited criteria of “Financial Performance and Growth” for the former and “Financial Performance and Shareholder Value” for the latter.
We herald the work of The Boardroom Project to define marketing ROI metrics and best practices, but continue to emphasize the importance of studying each company’s unique culture, market situation and sales workstyle before prescribing tactics and performance measures. When it comes to metrics, we strongly believe in a customized dashboard approach. We start with a full range of measurement tools, including but not limited to those linked to cash flow drivers — then select the indicators that will be most meaningful for your company, for a particular campaign, or for a defined period of time or growth.
Our purpose, after all, is to help you improve branding, marketing and sales, differentiate from competitors, and achieve success as you define it — not simply to corral you toward a generally accepted statistical pen.
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